Economic growth estimates start to be compiled
· The December quarter economic growth data is released on March 2. But in the coming week, pieces of the puzzle start to be put together. The other focus domestically is on wages.
· The week kicks off on Monday with the release of the business sales index from Commonwealth Bank. In contrast to the retail trade data from the Bureau of Statistics (ABS), the BSI is a measure of economy-wide spending.
· Also on Monday, Reserve Bank (RBA) Assistant Governor (Financial Markets), Guy Debelle, delivers a speech.
· On Tuesday, another senior official delivers a speech – Tony Richards, Head of Payment Policy Department, at the Payments Innovation 2016 Conference.
· Also on Tuesday the weekly consumer confidence data is released. Consumer sentiment rose 2 per cent last week.
· On Wednesday, the ABS releases the Wage Price Index – the main measure of wage costs in Australia. We expect that wages remained tame in the December quarter, lifting by 0.6 per cent in the quarter and by 2.3 per cent on the year.
· The jobless rate has eased from around 6.3 per cent to 5.8 per cent. If annual wage growth remains near record lows of 2.3 per cent, that isn’t a concern. But if wages show signs of lifting, then the Reserve Bank will start re-thinking traditional relationships of economic growth, wages and inflation.
· Also on Wednesday, preliminary data on construction work is released for the December quarter. The data on residential work completed is an input into the calculation of economic growth.
· On Thursday, the ABS will release the December quarter estimates on business investment. This data is also an input into the calculation of economic growth. But also insightful are the estimates of planned investment for the coming year.
· Overall we expect that investment fell by 7.5 per cent in the quarter, reflecting the winding down of the mining construction boom. The Reserve Bank will be interested in estimates of non-mining investment.
· Also on Thursday, more detailed demographic and regional estimates on employment will be released alongside the semi-annual estimates of average weekly earnings – the dollar estimates of wages in the economy.
· On Friday the ABS issues the estimates of business entries and exists – timely estimates on the number and type of businesses that exist in Australia.
US housing sector under the spotlight
· In the US, there is the usual bevy of economic indicators to be released with the focus on the housing sector. The only data of note in China are the January estimates of home prices, released on Friday.
· The week kicks off in the US on Monday with the National Activity index and the Markit “flash” estimates of manufacturing activity in US, Japan and Europe.
· On Tuesday in the US, the CaseShiller home price series is issued alongside consumer confidence, existing home sales and the influential Richmond Federal Reserve index. The annual growth rate of home prices may have edged up from 5.8 per cent to 5.9 per cent in December. But consumer confidence may have fallen from 98.1 to 97.3 in February. And home sales may have eased by 1.5 per cent in January.
· On Wednesday data on new home sales is issued. And just like existing homes, sales may have fallen in January – down 4 per cent after a near 11 per cent gain in December.
· In the US on Thursday, the estimates on durable goods orders – a proxy for business investment – are released together with the usual weekly data on new claims for unemployment insurance (jobless claims) and FHFA home price series.
· And on Friday in the US, the second (preliminary) estimate of economic growth is released with personal income and spending data and consumer sentiment. US economic growth slowed to 0.7 per cent in the December quarter. And the Federal Reserve’s preferred inflation estimate is contained in the personal income release.
Sharemarkets, interest rates, exchange rates and commodities
· The local profit reporting season winds down in the coming week. As always the focus is on the latest earnings result, forward guidance and decisions made on dividends. So far the surprise has been the fact that companies are still keen to either lift or maintain dividends.
· Amongst those reporting on Monday are Brambles, BlueScope Steel and UGL.
· On Tuesday earnings results include those from BHP Billiton, Qantas, Oil Search, Caltex and Healthscope.
· On Wednesday, amongst those expected to issue results are Flight Centre, Wesfarmers, Worley Parsons, Asciano, Macquarie Telecom, MacMahon and Fortescue Metals.
· On Thursday, companies that are scheduled to report include Seven Group, Ramsay Health Care, Alumina, South32, Blackmores, Nine Entertainment, Crown Resorts, Adelaide Brighton, APN News and Media and Breville Group.
· And on Friday, earnings are expected from Woolworths, Westfield, Prime Media, Cabcharge, Billabong and Fantastic Holdings.